Stimulus Cash Instead of Tax Credits

Feds announce terms of cash program for renewable projects
Posted on July 10, 2009 by rohdec12
Feds at last announce how to obtain stimulus package cash (in lieu of tax credits) for renewable projects.

Treasury, Energy Announce More than $3 Billion in Recovery Act Funds for Renewable Energy Projects

Cash Assistance Will Increase Economic Development, Promote Renewable Energy Use
Program Guidance Now Available to Businesses to Facilitate Swift Implementation
WASHINGTON – As part of an innovative partnership aimed at increasing economic development in urban and rural areas while setting our nation on the path to energy independence,

• the U.S. Department of the Treasury and the U.S. Department of Energy today announced an estimated $3 billion for the development of renewable energy projects around the country and made available the guidance businesses will need to submit a successful application.
• Funded through the American Recovery and Reinvestment Act (Recovery Act), the program will provide direct payments in lieu of tax credits in support of an estimated 5,000 bio-mass, solar, wind, and other types of renewable energy production facilities.

“The renewable energy program provides another important avenue for the Recovery Act to contribute to economic development in communities around the country,” said Treasury Secretary Tim Geithner. “It will provide additional stimulus to economies in urban and rural America by helping to develop domestic sources of clean energy.

This partnership between Treasury and Energy will enable both large companies and small businesses to invest in our long-term energy needs, protect our environment and revitalize our nation’s economy.”

• The Recovery Act authorized Treasury to make direct payments to companies that create and place in service renewable energy facilities beginning January 1, 2009.
• Previously, these companies could file for a tax credit to cover a portion of the renewable energy project’s cost; under the new program, applicants would agree to forgo tax credits down the line in favor of an immediate reimbursement of a portion of the property expense.
• This direct payment program allows for an immediate stimulus in local economies.
  Said Energy Secretary Steven Chu: “These payments will help spur major private sector investments in clean energy and create new jobs for America’s workers.
• It is part of our broad effort to double our renewable energy capacity in the next few years and make sure that America leads the world in creating the new clean energy economy of the future.”

In previous years, the tax credit has been widely used. It is considered a successful incentive for encouraging the development of renewable energy. In 2006, approximately $550 million in tax credits were provided to 450 businesses. The rate of new renewable energy installations has fallen since the economic and financial downturns began, as projects had a harder time obtaining financing. The Departments of Treasury and Energy expect a fast acceleration of businesses applying for the energy funds in lieu of the tax credit.

To expedite implementation of the program, Treasury and Energy are today making available the terms and conditions, guidance, and a sample application [applications not yet being accepted, btw] at http://www.treas.gov/recovery/1603.shtml so that companies can prepare successful applications in advance of the launch of the web based application in the coming weeks – yet another tool designed to facilitate the timely flow of program fundsto eligible businesses.

The Rest @ US Treasury

Green Inc adds further analysis:

Post updated, 7/10/09; 6:24 a.m.

The Treasury and the Energy Department today unveiled long-awaited new rules under which the government will pay up to 30 percent of the cost of renewable energy projects.
Congress authorized the program as part of the stimulus package in February, but many projects have been delayed as investors waited to apply for the grants.

Government officials said that although there is no cap for the money, they expected to give out $3 billion in grants. UPDATE: The Energy Department estimated that the renewable energy projects would have annual production of more than 13 million megawatt-hours of electricity, or enough renewable energy to supply over half a million homes.

A similar amount of electricity is supplied by two medium-sized nuclear reactors.
“One of the core goals we have is to get private capital off the sidelines and back into the market,’’ said Matt Rogers, a senior adviser at the Energy Department.

The program replaces a system of tax credits, in which the government subsidized such projects by letting businesses pay less tax on future profits. Many of those businesses have no profits these days, however.

Even for those that are profitable, “It accelerates the benefits,’’ said Michael Mundaca, the acting assistant treasury secretary for tax policy. “You don’t have to wait to file a tax return.”
The Treasury said it would make payments within 60 days of receipt of a completed application for a project that was in service, and said it would begin accepting applications around Aug. 1.
F.B.R. Research, a financial firm, suggested that it could be later.

“Treasury is unlikely to begin accepting applications until it is confident that it can process them within the required 60 days,’’ the company said in a research note.

The Treasury published a sample application form that officials promised would be very close to the final form, so that companies could begin preparing the paperwork.

Most projects would be eligible for reimbursement if they go into service by Jan. 1, 2014; some would have until Jan. 1, 2017. Construction must begin this year or next.

The renewable energy industry welcomed the announcement.
“We think it will unleash the financing for projects,” said Monique Hanis, a spokeswoman for the Solar Energy Industries Association, referring especially to utility-scale solar. “We have literally dozens of projects that are on hold.”

By Matthew L. Wald